Core transaction deposits up $75.2 million in fourth quarter, or 10 percent annualized

Solid improvement in credit quality

United Community Banks, Inc. (NASDAQ: UCBI) today reported net income of $9.3 million, or 11 cents per share, for the fourth quarter of 2012, and net income of $37.9 million, or 44 cents per share, for the year. The results for the fourth quarter and year reflect modest loan growth, improved credit quality, strong core transaction deposit growth, an increase in fee revenue, and lower operating expenses compared with the same periods a year ago.

"We had another positive quarter and a very productive year in rebuilding our core earnings and positioning United for future growth," said Jimmy Tallent, president and chief executive officer. "In the fourth quarter we achieved meaningful improvement in every key measure of credit quality, and we continued to build strong momentum in growing new customer loan and deposit relationships."

Tallent continued, "We grew our loan portfolio by $37 million from the third quarter, for an annualized rate of 4 percent. That was no easy accomplishment in the current business environment. Additionally, our core transaction deposits increased by $75 million, or 10 percent annualized. At the same time we lowered nonperforming assets by 10 percent, to $128 million. This total includes our lowest level of foreclosed properties since 2007, at $18 million. Even more encouraging was the significant drop in net charge-offs to $14.5 million, the lowest level since the second quarter of 2008."

"This was a good way to end a successful year," Tallent stated. "During 2012, we achieved $65 million in net new loan growth and we increased core transaction deposits by $311 million or 11 percent. Continued growth in quality loan and deposit relationships remains a top priority."

The fourth quarter provision for loan losses was $14 million, equal to a year ago and down $1.5 million from the third quarter. Fourth quarter net charge-offs were $14.5 million compared to $20.6 million in the third quarter and $45.6 million in the fourth quarter of 2011.

"The inflow of nonperforming loans in the fourth quarter was $20 million, the lowest quarterly total since the beginning of the economic cycle," Tallent said. "We expect this trend will lead to lower quarterly charge-offs and loan loss provisions during 2013."

Taxable equivalent net interest revenue totaled $56.0 million, down $1.34 million from the third quarter of 2012 and down $3.02 million from the fourth quarter of 2011. "The decrease primarily reflects lower yields on our investment securities and loan portfolios, as well as the overlap of new senior debt issued at the beginning of the fourth quarter that was used to repay subordinated debt that matured late in the fourth quarter," said Tallent.

"The lower yield on our loan portfolio reflects ongoing pricing pressure on new and renewed loans," Tallent continued. "Our investment securities interest decline was due to reinvestment of cash flows at record low rates. We continue to look for reinvestment opportunities with a focus on floating-rate securities to alleviate market and duration risk. Floating-rate securities, which account for 38 percent of the total investment securities portfolio, improve our interest sensitivity position by reducing our exposure to rising interest rates," Tallent continued.

The taxable equivalent net interest margin was down 16 basis points from the third quarter and 7 basis points from a year ago to 3.44 percent. "Five of the 16 basis point linked-quarter margin decline was due to the overlap in the replacement of maturing subordinated debt," stated Tallent. "Another five basis points was due to the scheduled repricing of certain corporate bonds from a fixed to floating rate. These floating rate securities were part of a planned strategy to maintain a neutral to slightly asset-sensitive interest rate position. The balance of the decrease was due to a new loan product offering with a low introductory rate that will reprice in 2013 and continued loan pricing pressures."

Fee revenue was $14.8 million for the fourth quarter, compared to $13.8 million for the third quarter and $12.7 million a year ago. The increase from prior quarters was primarily due to the higher level of mortgage loans closed and related fees. Mortgage refinancing activity continued at a strong pace through the fourth quarter as mortgage rates remained at record low levels. Closed mortgage loans totaled $100 million in the fourth quarter compared with $108 million in the third quarter and $78.8 million in the fourth quarter of 2011. Service charges and fees on deposit accounts were also up from a year ago due to new fees on low balance deposit accounts that became effective in the first quarter of 2012, and to higher debit card interchange fees.

Other fee revenue was down $217,000 from the third quarter of 2012 and $466,000 from the fourth quarter of 2011 to $2.34 million. The decrease was primarily due to lower hedge ineffectiveness gains and to a fourth quarter 2011 gain of $728,000 from the sale of state low-income housing tax credits.

Operating expenses, excluding foreclosed property costs, were $42.1 million for the fourth quarter of 2012 compared to $41.1 million for the third quarter and $41.8 million a year ago. The increase from a year ago was due primarily to a $2.24 million, one-time credit adjustment in the fourth quarter of 2011 related to our retirement plan that reduced salary and employee benefit expense in that period. Excluding the foreclosed property costs and the one-time credit adjustment, quarterly operating expenses were down $1.9 million from a year ago. Reduced staff levels and related costs were the primary drivers of the decrease. United had 164 fewer staff positions in the fourth quarter of 2012 compared to the fourth quarter of 2011.

Foreclosed property costs for the fourth quarter of 2012 were $4.6 million, compared to $3.7 million in the third quarter and $9.3 million a year ago. Fourth quarter 2012 costs included $1.4 million for maintenance and $3.2 million in net losses and write-downs. For the third quarter of 2012, foreclosed property costs included $962,000 in maintenance and $2.7 million in net losses and write-downs. Fourth quarter 2011 foreclosed property costs included $2.4 million in maintenance and $6.9 million in net losses and write-downs.

As of December 31, 2012, capital ratios were as follows: Tier 1 Risk-Based of 14.2 percent; Tier 1 Leverage of 9.7 percent; Total Risk-Based of 15.8 percent; Tier 1 Common Risk-Based of 8.9 percent; and, Tangible Equity-to-Assets of 8.6 percent.

"By every measure, 2012 has been a year of significant improvement for United Community Banks," Tallent said. "Reflecting on all that this banking team has accomplished in restoring credit quality, regaining momentum in new business growth, and improving operating efficiency, I cannot help but look forward with excitement.

"We know that challenges remain as the economy continues to be sluggish and rates are at record lows," Tallent continued. "At the same time we expect credit measures to continue to improve, and this will translate into lower levels of charge-offs and provisioning. We see opportunities to grow our mortgage and advisory services businesses, and will look to expand both. We believe we can grow our loan portfolio and we will accomplish this by continuing to add lenders in key markets, as well as expanding into new markets, like Greenville, South Carolina, where we recently opened a loan production office."

Tallent concluded, "We constantly evaluate and find ways to improve this company -- to make it more productive and efficient while continuing to deliver the best customer service in the industry. Ultimately we are committed to delivering superior financial results on behalf of our shareholders. We are committed, we are up to the challenge, and we look ahead with determination and optimism."

Conference Call

United will hold a conference call today, Thursday, January 24, 2013, at 11 a.m. ET to discuss the contents of this news release and to share business highlights for the quarter. To access the call, dial (877) 380-5665 and use the conference number 86024021. The conference call also will be webcast and can be accessed by selecting 'Calendar of Events' within the Investor Relations section of United's website at www.ucbi.com.

About United Community Banks, Inc.

Headquartered in Blairsville, United Community Banks, Inc. is the third-largest bank holding company in Georgia. United has assets of $6.8 billion and operates 105 banking offices throughout north Georgia, the Atlanta region, coastal Georgia, western North Carolina, east Tennessee and northwest South Carolina. United specializes in providing personalized community banking services to individuals and small to mid-size businesses and also offers the convenience of 24-hour access through a network of ATMs, telephone and on-line banking. United's common stock is listed on the Nasdaq Global Select Market under the symbol UCBI. Additional information may be found at United's website at www.ucbi.com.

Safe Harbor

This news release contains forward-looking statements, as defined by federal securities laws, including statements about United's financial outlook and business environment. These statements are based on current expectations and are provided to assist in the understanding of future financial performance. Such performance involves risks and uncertainties that may cause actual results to differ materially from those expressed or implied in any such statements. For a discussion of some of the risks and other factors that may cause such forward-looking statements to differ materially from actual results, please refer to United's filings with the Securities and Exchange Commission including its 2011 Annual Report on Form 10-K under the sections entitled "Forward-Looking Statements" and "Risk Factors." Forward-looking statements speak only as of the date they are made, and we undertake no obligation to update or revise forward-looking statements.

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